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Title: |
Financial Innovation and the Demand for Money:
Evidence from the Philippines |
| Author: |
Hafer, R. W.;
Kutan, Ali M. |
| Author
Affiliation: |
Southern IL U |
| Source: |
International Economic Journal, Spring 2003, v. 17, no. 1, pp. 17-27 |
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Publication Date: |
Spring 2003 |
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Abstract: |
This paper
tests whether financial innovations in the Philippines distorted the
long-run relation between real money balances, income and interest
rates. Using data for the monetary base, Ml and M3 over the period
1980-1998, we cannot reject the hypothesis that there does not exist a
standard money demand relation between Ml and M3, real income and
interest rates. However, when we allow for the impact of financial
innovations, this finding is reversed for Ml. Estimates of ECM models
for these measures also show that financial innovations impacted real
money balances for Ml, but not M3. This evidence supports the Philippine
central bank's choice of a monetary aggregate as its policy instrument
to achieve its policy objectives. |
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